A taxpayer can substantiate vehicle expenses by keeping an exact record of the amount paid for gasoline, maintenance, insurance, and other costs. However, the optional standard mileage rate method is a simplified method available to businesses, self-employed persons, and employees in computing deductions for vehicle expenses in lieu of calculating the operating and fixed costs allocable to business purposes.
Beginning on January 1, 2015, the optional standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 57.5 cents per mile for business miles driven (includes a 24 cent per mile allocation for depreciation);
- 23 cents per mile driven for medical or moving purposes; and
- 14 cents per mile driven in service of charitable organizations.
CAUTION: With the recent substantial drop in gas prices there is a very good chance the IRS will adjust the standard mileage rates mid-year to reflect the lower gas prices as they have done in prior years when gas prices spiked during the year.
Under the optional standard mileage rate method, the taxpayer determines the amount of allowable deduction by multiplying all the business miles driven during the year by the optional standard mileage rate.
The business portion of parking fees and tolls may be deducted in addition to the optional standard mileage rate.
Interest paid by an employee on a car loan is nondeductible personal interest. However, a self-employed taxpayer may claim the interest paid on the business portion of the vehicle as a business expense. (The nonbusiness portion is nondeductible personal interest.)
If you have questions related to best method of deducting the business use of your vehicle or the documentation required, please give this office a call. We’d be glad to help!